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2012-03-02 08:03:50
All but two of the EU's 27 leaders have signed a new treaty to enforce budget discipline within the bloc.
The "fiscal compact" aims to prevent the 17 eurozone states running up huge debts like those which sparked the Greek, Irish and Portuguese bailouts.
To take effect, the pact must be ratified by 12 eurozone states.
UK Prime Minister David Cameron, who with the Czechs refused to sign, said his proposals for cutting red tape and promoting business had been ignored.
But the newly re-appointed President of the European Council, Herman Van Rompuy, said British calls to boost the EU economy were being taken seriously and he had sought to re-draft the summit's conclusions accordingly.
Fiscal compact
Enshrines balanced budget rule in law and foresees penalties for offenders
Driven by Germany which already has budget prudence written into its constitutions
Rejected by UK over financial service regulations that might affect the City of London
Q&A: EU treaty to control budgets
Critics argue that the pact is mainly a political gesture aimed at reassuring taxpayers in Germany, the eurozone's dominant economy, where there is reluctance to pay for further eurozone bailouts.
German Chancellor Angela Merkel described its as a "great leap", a first step towards stability and political union.
The pact emerged after Mr Cameron vetoed plans to change the EU treaties to enforce greater budgetary discipline back in December.
These new powers may face an early test as both Spain and the Netherlands have admitted they will miss targets for reducing their deficits, BBC Europe editor Gavin Hewitt reports.
While there has been a change of emphasis at this summit, "from crisis mode to growth mode" in the words of one senior official, it will be difficult to achieve whilst tough spending cuts are being made, Gavin Hewitt adds.
'Credibility at stake'
In a speech at the signing ceremony, Mr Van Rompuy said: "This stronger self-constraint by each and every one of you as regards debts and deficits is important in itself.
"It helps prevent a repetition of the sovereign debt crisis. It will thus also reinforce trust among member states, which is politically important as well.
"The restoration of confidence in the future of the eurozone will lead to economic growth and jobs. This is our ultimate objective."
Speaking shortly after signing the pact, the President of the European Commission, Jose Manuel Barroso, said it was a strong political statement for the EU.
"In the eyes of the world what is at stake is the very credibility of the euro area and of Europe as a whole," he said.
The pact, he said, enhanced the euro's permanence "contrary to all the negative prophecies".